Lloyd’s Register’s first Technology Radar – Low Carbon is a timely response to the low carbon momentum building across the sector and beyond. The research examines the technological future of low carbon across the value chain: generation, transmission, distribution and energy storage. Our findings show that industry experts are optimistic about the pace of innovation in the low carbon space, and shed light on which technologies will have the most impact on the sector.

The research is based on the opinions of nearly 600 professionals across the low carbon industry – from energy utilities and distributors through to equipment manufacturers. Respondents were asked to rate a number of technologies in terms of their potential impact, the amount of time it would take for these technologies to hit the market, and how likely they are to be adopted once they do. They were also asked on reflect on the pace and success of innovation in their sector - and what they see as the major drivers and blockers. From their responses, and insight from a number of leading industry experts, a number of key findings have emerged.

What are the critical success factors for uptake of renewables? How does this differ for onshore wind / offshore wind / solar etc?

As with all major infrastructure, renewable energy projects require significant upfront capital expenditure which is returned over time. However, from the findings of the Technology Radar survey, there is clear recognition that renewable energy sources such as wind and solar are now reaching cost parity with their fossil-fuel-based alternatives, but intermittency is a challenge that has yet to be solved.

While oversupply can to some extent be traded through regional grids, baseload power is still needed for when the wind fails to blow or the sun fails to shine. Therefore strong committed policy is needed to ensure investor confidence in the opportunity to generate returns. Regular reviews or changes to policies are indications of market weakness, and can scare investors off. Subsidies or certificate schemes are still important to balance out local power prices versus capital investment needs, and to drive the take up of renewables, but the consistency of the policy is key. Well advised governments who don’t try to re-invent the wheel can setup an excellent environment to encourage strong growth the sector and significant uptake in renewable energy.

At a more local level, clear rules on connecting projects to the local grid along with clear planning and environmental policies will facilitate the faster development of onshore projects with less public concern over the impact of infrastructure in their region.

How does this differ for onshore wind / offshore wind / solar etc

Stakeholders in onshore and offshore projects differ. With significantly different costs, offshore developers are major companies with strategic aims and follow a national policy focused on the uptake of such projects. Onshore developers are traditionally much smaller, taking larger upfront risks, and trying to read the market and the future. Solar farms for example can go from feasibility to operation within 12 months, whereas an offshore project will take 10 times that, so the considerations for each of those involved are different.

What do you see as the biggest threat/blocker to the development of renewables, either in a particular region or globally?

A carbon free world is the target. Transitioning away from carbon intensive fuel sources takes time, investment and will involve a range of technologies, each with positive and negative aspects. Nuclear energy is a very good source of energy, albeit our approaches to dealing with fuel production and fuel waste need to improve. Should fusion technology achieve commercial status then it could be a game changer. Renewable energy’s share continues to grow, and the technologies have improved significantly, providing high penetration for many countries around the world at very low cost. Energy storage is starting to address the intermittency issues that are constantly portrayed, but significant renewable energy on a national network is very achievable.

The contraction or expansion of any share of market will depend on individual country policy and overall price. Remember that for new build generation, renewable energy is the cheapest option, and is a more obvious choice than building expensive new gas plants for example, assuming that renewable resources are available. As gas plants age and require refurbishment, the costs can quickly spiral. Alternatively, a strong renewable energy policy can avoid those issues by supporting a transition to renewable energy early.

Political statements and overall policy decisions are critical. With 2020 rapidly approaching, those countries with % targets are now looking to review their position, and determine relevant policy focused on achieving targets set in Paris along with longer term goals. Maintaining momentum is important to keep investors and core businesses involved.

In Australia for example, the coalition government set the renewable industry back years with climate change denialist statements, reviews of renewable targets, and uncertainty over long term policy. Investment in the industry dropped 90% in a 12 month period around 2013. Only in late 2016 was confidence slowly being restored and projects starting to make progress again. The beacon in those difficult times was the ACT, with a policy of 100% renewable energy by 2020, with 20 year government backed PPAs available through reverse auction systems. This hugely successful scheme has moved the ACT towards achieving 100% renewable energy, with very cheap energy prices now powering Australia’s capital.

The impact of carbon on the environment and the significant changes to the climate that we are already witnessing should be evidence enough to drive major investment in renewable energy projects, but the political environment globally is not stable and in some key markets is more driven by economics than by science.

What is blockchain, how do you see it impacting the sector, and what do you see as the blockers?

According to the survey findings, blockchain could reshape the way we think about the transmission and distribution of power by enabling a new era of peer-to-peer low carbon generation.

Blockchain technology has the potential to provide technology solutions to the various challenges in the energy sector: including data coordination between a myriad of devices; a low-friction, automated trading platform; and open access for innovative products and services.

Industry uses are vast as it leverages decentralized peer-to-peer internet technology, where both computers and people share a distributed ledger. Blockchain technology could be used to ‘send’ energy such as electricity or gas or solar, or a combination anywhere in the world via utility apps that are built utilising the blockchain. Energy trading using blockchain technology could happen directly with another party without such a trading platform or intermediary and that at very low costs.

The first ever blockchain energy transaction took place in the US early in 2016, when a pilot project by US startup LO3 Energy enabled a New York City resident to generate their own solar power and sell it to a neighbour. Over the next decade, blockchain has the potential to tap into the sharing economy and unlock a vast, decentralised energy marketplace.

As the expertise involved in these projects is not specifically industry-related, it could provide an opportunity for new market entrants. Some of the future innovators or disruptors in transmission and distribution may well be technology companies, rather than utilities or traditional suppliers to the energy sector.

A number of utilities have already taken measures to counter the threat posed by these new entrants. Vattenfall, one of Europe’s largest power generators, has launched its own energy sharing marketplace called Powerpeers, which takes the peer-to-peer feature a step further by connecting to the mobile communications platform WhatsApp. German utility firm EnBW, meanwhile, has invested in a start-up energy cooperative, and Siemens has started collaborating with LO3 Energy to jointly develop blockchain-based microgrids. By improving long-distance transmission and grid infrastructure, high-voltage direct current (HVDC) – another innovation included in our technology radar – offers opportunities for communities that are unable to absorb all of their local energy supply. For regions struggling with renewable energy overcapacity, such as northwest China, these power superhighways and grids cannot come fast enough.

The report says solar will have a big impact in the coming years – which regions do you think will be most impacted? What proportion of demand do you think solar could potentially account for in the next decade?

MIT published a groundbreaking study in 2016 proving that solar thermophotovoltaics (STPVs) could beat the traditional maximum efficiency of solar cells (which is slightly over 30%). This makes it theoretically possible for a given area of panels to supply twice as much power as they do currently. Clearly, innovation will reshape how we think about the effectiveness of solar in the years ahead.

And COP21 has had a major part to play in this. Respondents from Asia Pacific (72%), Europe (71%), and North America (68%) agreed that the COP is playing a major role in influencing the growing urgency around climate change.

Can you talk a bit about the energy storage sector and it’s roll in the uptake of renewables?

The storage technology that respondents believe will have the biggest impact is electrical technology such as supercapacitors, which will rapidly speed up charging times for large batteries.

Respondents predict that the next innovation to shake up energy storage will be software related. This makes sense: software improvements are an ‘easy fix’ to boost the efficiency of current storage technologies, and are easier to push out to market than new storage hardware.

What is required for the renewable energy industry to accelerate growth over the next 5 years?

Technological developments are making a low carbon future increasingly viable. In renewables, strides have been made in bringing down costs and achieving grid parity with fossil fuel generation. While engineers work towards the next generation of energy storage solutions, software advances are also improving the efficiency of existing technology. And in transmission and distribution, blockchain points to a future of peer-to-peer renewable energy grids. This needs to continue.

Globally, countries that have embraced renewable energy have seen the rewards. Investment grows, jobs grow and the economy benefits across the board. Those that have done it best, and there are many lessons to learn, have put in place strong long-term policies to guide the industry, and have ensured clarity in the legal framework. The key to growth in any industry is providing investor confidence.

This research by Lloyd’s Register demonstrates the progress that has been made in recent years towards a diverse energy mix that includes low carbon sources as well as innovative fossil fuel technology. Through this combination, communities across the globe can enjoy security of supply.

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